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The Federal Government’s plan to use the $500 million World Bank’s loan to overhaul the operations of the power Distribution Companies (DisCos) will largely improve the nation’s electricity supply. The DisCos, which came into existence following the 2012 privatisation exercise in the sector, are performing below expectation. Despite the huge investment in the sector by government and the Central Bank of Nigeria (CBN), the nation’s power supply has not significantly improved.
However, energy experts believe that the injection of the $500 loan will make our power supply reliable, stable as well as attract private capital. The Minister of Power, Abubakar Aliyu, who confirmed the move to take the World Bank’s loan in Abuja, decried the abysmal performance of the DisCos that led to the sack of the management of some of them. He revealed that the government would no longer subsidise the sector.
At present, the CBN, the Bureau of Public Enterprises (BPE) and some lender banks now control about 60 per cent of the DisCos. They have given the management of the DisCos between six months and one year to get new investors to turn around the fortunes of the ailing firms. The World Bank’s loan will enable the DisCos to stabilise their operations. The loan, according to the minister, had been there since last year, but government had waited till now to access the facility to restructure the DisCos.
No doubt, the power sector is in its worst state ever. It is in need of urgent resuscitation. Currently, the country can only generate about 4,000MW of electricity, far less than the energy needs of Nigerians. This is in spite of the government’s promise in 2015 to increase power generation to 40,000MW. According to statistics, the Buhari government inherited power generation capacity of 6,666.28MW in 2015.
Today, the nation’s power generation capacity has drastically reduced. This is due to frequent national grid collapse, debt, corruption, poor transmission and distribution challenges, among others. Over the last seven years, a total of N1.7 trillion was injected into the sector. It also got additional $3billion loan from multilateral institutions. The performance of the sector is yet to justify the huge investments.
Besides, about N5.7trillion was reportedly paid by electricity consumers as tariff in the last seven years, at N720 million per year. Revamping the sector will require some structural changes in the supply chain. The current policy inconsistency must give way for realistic projections with definite and measurable outcomes.
Recent data from the Nigerian Bulk Electricity Trading (NBET) company showed that in seven years that electricity consumers had spent about N5.7trillion on tariffs. This is not what Nigerians hoped for 19 years ago when the sector was privatised. The 15-year multi-year tariff order (MYTO) was up for review last year. But the NBET, which oversees the implementation of MYTO, cannot be said to have the capacity to muster the necessary funds to guarantee stakeholders’ expectations.
Although liberated from state bureaucracy, the power sector still contends with numerous challenges such as gas supply, inadequate metering and ailing transmission network. Also, corruption and lack of political will have limited the power sector reforms from meeting the objectives. The rising cost of electricity has increased the cost of production of goods.
This is why Nigeria has been listed among the top 20 countries in the world that lack access to clear fuel technology for cooking and industrial uses. That is an indicator of underdevelopment. Therefore, urgent action is needed to shore up the nation’s power supply through other sources of energy like solar and wind.
Nigeria must position itself to overcome the power supply challenge by increasing investment in the sector. That is one of the ways the economy can grow beyond the projected annual rate of teo per cent. While calling for the judicious utilisation of the $500 million loan, adequate monitoring is necessary to ensure that it is not misappropriated or diverted to other ends. If the power sector reforms are transparently implemented, Nigeria’s power supply can be stable.
